The technology paradox: It will kill jobs but rescue Britain’s economy

 
Matthew Rock
THE LATEST GDP numbers were awful. The UK economy shrank by 0.7 per cent. But rather than embarking on political blame-games, we must face a stark fact: the economy needs a clean-out. All the fiscal and monetary levers have been pulled, and they haven’t worked.

A much bigger story is at play – digital technology is killing the UK economy. But paradoxically, it also provides our only hope of salvation. The technologies that are destroying existing jobs and models of wealth creation are the only realistic means we have of creating future growth.

Next time you pay for groceries at a self-pay checkout, you’re contributing to reduced demand in the economy. That Tesco employee, replaced by a machine, may not have found a new job and is added to the welfare bill.

Every time you buy a digital book at Amazon, the economy shrinks a little more. The bookshop owner, the staff, and the printer fall out of commission.

And so it goes on. The devastation wreaked by digital technology on old-style business moves ever forwards.

Everywhere you look, inefficiency is rife. Industries, businesses, departments, job functions are dying due to lack of relevance.

One area is management, part of commercial life for the past 150 years. A chief characteristic of the internet is the way it cuts out the need for much management. Wonga.com’s operating model is just one example. Its website proudly declares: “We are the first company in the world to fully automate the business lending process. There’s no paperwork, meetings with bank managers or hanging on the phone – our entire service is online and real-time.” Like it or not, this is what financial services will look like in the future.

The public sector is the most obvious example of inefficiency unmasked by technology. Huge chunks of its work could be more efficiently delivered, with far lower fixed costs, by the widespread adoption of technology. Cast your eyes forward: will we really have vast housing departments in 20 years’ time when, already, users and properties can be instantly matched through the internet? Look at Storemates, the website that links people with space to people who need space. Wouldn’t this model be a better, leaner, faster way of delivering housing services?

The Prime Minister’s former adviser, Steve Hilton, caused consternation when he said that the Whitehall headcount could be more than halved. Was he so foolish? Private sector businesses are doing their best to contain fixed-cost commitments, so they’re lean enough to adapt if market conditions change. For the sake of the country’s structural deficit, wouldn’t it be smart for the public sector to do the same?

“Better but smaller” – that’s the phrase you hear regularly from business owners. We’re becoming more efficient, but we’re also shrinking.

Over and over again, the job-destroying and GDP-reordering logic applies: drones replace soldiers; self-ordering tables replace waiters; Satnav technology removes the need for taxi driver training instructors.

And it will get worse. Across the UK, great swathes of business and society have been shown to be irrelevant and inefficient at a time of technological change. The internet and digital technology have shone a light that will not go away. Automation is destroying thousands of jobs in the UK, and millions around the world.

As a result, many industries and aspects of life are becoming dramatically more efficient. Does anyone want to return to the days of queuing at a Post Office to renew your car’s tax disc?

Of course, the new technologies, and the new business models they unleash, are themselves spawning new jobs and industries, opening new markets. My favourite story is Wiggle, which started life as Butlers Cycles, a small independent bike shop in Portsmouth that had been trading since 1920. This could have been another high-street failure, but the owners had the foresight to start selling bike kit online. 13 years later, Wiggle sells 250,000 product lines to 70 countries. Now that’s real wealth and job creation.

However, right now, we have too many Butlers Cycles and not enough Wiggles. The new technology-enabled economy is not yet substituting for the large-scale, lost contribution to employment and GDP. That task will require time, re-skilling and rebuilding: a global industrial catharsis.

Technology is killing our economy, but it’s also our only hope of recovery.

Matthew Rock is a founder of Real Business, the UK’s first magazine for entrepreneurs and growing businesses.